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MEETING MINUTES LIGNITE RESEARCH COUNCIL February 18, 1998 Doublewood Inn, Bismarck, ND

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MEETING MINUTES LIGNITE RESEARCH COUNCIL February 18, 1998 Doublewood Inn, Bismarck, ND MEETING MINUTES LIGNITE RESEARCH COUNCIL February 18, 1998 Doublewood Inn, Bismarck, ND MEMBERS (or their authorized alternates) PRESENT: Steven Benson Energy & Environmental Research Center Curtis Blohm Knife River Corporation John Bluemle North Dakota Geological Survey Warren Candy Minnesota Power Kevin Cramer North Dakota Economic Development & Finance John Dwyer Lignite Energy Council Randel Christmann North Dakota State Senator Rich Fockler Basin Electric Power Cooperative Bruce Hagen North Dakota Public Service Commission Kent Janssen Dakota Gasification Company Douglas C. Kane MDU Resources Group Inc. Harvey Ness Department of Energy/FETC Dean Peterson The North American Coal Corporation Chuck Reichert BNI Coal, Ltd. Martin Schock North Dakota Department of Health David Sogard Minnkota Power Cooperative Valdon Swanson North Dakota Farm Bureau John Weeda Cooperative Power Gordon Westerlind United Power Association OTHERS PRESENT: Jim Deutsch North Dakota Public Service Commission Karlene Fine Industrial Commission of North Dakota Vicki Gilmore Lignite Energy Council Alan M. Hurlbut BNI Coal, Ltd. John Hurley, Ph.D. Energy & Environmental Research Center William Peterson BNI Coal, Ltd. Clifford R. Porter Lignite Research Council Lyle Witham Assistant Attorney General Lignite Research Council (LRC) chairman John Dwyer called the LRC meeting to order on February 18, 1998, at Doublewood Inn, Bismarck, North Dakota. He asked everyone to introduce themselves. Newly appointed LRC members in attendance were Kevin Cramer, Senator Randel Christmann and Dean Peterson, who has replaced August Keller on the LRC. For the benefit of the new LRC members, Dwyer presented an overview of the North Dakota Lignite Research, Development and Marketing Program. Financial Summary Clifford R. Porter presented the financial summary for the 1997-1999 North Dakota Lignite Research, Development and Marketing Program. The total program budget for the 1997-1999 biennium is $14,123,560, which breaks down as follows: $400,000 for administration of the program, $400,000 for market feasibility studies, $1,740,102 for small research projects and $11,583,458 for demonstration projects. Dwyer said the total includes carryover funds from the 1995-1997 biennium. 1 Approval of Minutes; Old Business Dwyer asked for a motion for approval of the minutes of the December 4, 1997 LRC meeting. Bruce Hagen so moved; seconded by Rich Fockler. Motion carried. Chuck Reichert asked if a positive marketing study report had been submitted yet for the Grand Round XXVIII proposal titled “Evaluation of Market Potential for North Dakota Flue Gas Desulfurization Gypsum”. At the December 4, 1997 LRC meeting, Reichert had made a motion that the word “positive” be added in Porter’s funding recommendation contingency for Cooperative Power Association’s proposal LRC-XXIX-A titled “Construction of a Forced Oxidation Plant for Gypsum Production”. The contingency would then read: Completion of the positive marketing study for FY98-XXVIII-77. John Weeda said the marketing study report is approaching completion. New Business Dwyer asked Lyle Witham to summarize the Montana constitutional challenge to the North Dakota coal sales tax law. A complaint was filed in Burleigh County District Court against the North Dakota State Tax Commissioner on December 22, 1997 by Kennecott Energy Company (KEC) and Spring Creek Coal Company (SCCC) to challenge the North Dakota coal sales tax law. The law imposes a use tax on sales of coal that are not subject to North Dakota severance tax and that are used at North Dakota power plants. SCCC is a subsidiary of KEC and a producer of subbituminous coal in Montana. The law is part of House Bill 1467 that was introduced in the 1997 North Dakota legislative session. The law applies to coal used in North Dakota generation facilities that is not subject to severance tax. HB 1467 amended the North Dakota Century Code. North Dakota severance tax (which is used for the state general fund, coal trust fund, counties, cities and schools) is in lieu of sales tax. Witham said assistant attorneys general are handling the lawsuit for the state of North Dakota, and Charles Miller of the Fleck Law Firm, Bismarck, will be doing so for the North Dakota political subdivisions. Witham said Kathryn Alfson is the North Dakota assistant attorney general handling the case. Doug Kane asked what the timeframe will be for the case. Witham estimated 18 months to two years. Witham said the LRC might want to consider having the Industrial Commission file an amicus brief. Dwyer asked Witham for an update on the externalities case that will be heard before the Minnesota Court of Appeals on Feb. 24, 1998. Both North Dakota Attorney General Heidi Heitkamp and Witham will be there, with a motion before the Court of Appeals to give 15 minutes for oral arguments instead of four minutes. Heitkamp will argue the case. Dwyer said that Carmen Miller is the assistant attorney general replacing Witham for LRC matters, but Witham will stay involved in the externalities matters. Witham has been assigned as an assistant attorney general for the North Dakota Health Department. On behalf of the LRC Dwyer thanked Witham for his diligent work, expertise and extra time devoted to the externalities case. Deadlines for Proposal Applications; Future LRC Meetings Porter said that May 1 and September 1 are the remaining 1998 deadlines for submitting proposals for consideration in Grant Rounds XXXI and XXXII, respectively. Future LRC meeting dates for 1998 are July 22 and November 5. New Executive Order for LRC Membership On February 2, 1998, Governor Edward T. Schafer issued Executive Order 1998-01, which restructures the LRC to include 25 members. Instead of two representatives from the U.S. Department of Energy, there is now one (Harvey Ness, Federal Energy Technology Center). North Dakota Senator Randel Christmann replaced Senator William Goetz and Dean Peterson of The North American Coal Corporation replaced August Keller. Kevin Cramer, Economic Development and Finance, was added to the LRC membership as one of four representatives from state agencies. 2 Gerald Bauman, a Mercer County commissioner and chairman of the Coal Conversion Counties Association, was added to the LRC as the political subdivision representative. Lignite Research, Development and Marketing Program Updates Porter said one Lignite Marketing Feasibility Study (LMFS-96-25 – “Intermediates and Derivatives from Phenol) for $30,000 was started in the 1995-1997 biennium and is still open. Seventeen research program activities (small projects) have $1,979,936 in Lignite Research Funds committed to them as of January 1, 1998. Four demonstration projects in this biennium total $7,474,500. Target funding for the lignite marketing feasibility study priority areas is $400,000 for the 1997-1999 biennium. (The breakdown is $100,000 for market assessment, $75,000 for Regional Lignite Energy Marketing Plan implementation, $100,000 for byproduct marketing studies, $100,000 for environmental studies, and $25,000 for contingencies. No lignite marketing feasibility studies have been initiated for the 1997-1999 biennium.) Priority areas and estimated amounts for the recommended target funding for 1997-1999 for the research program activities (small projects) totals $861,633, which breaks downs as follows: environmental issues ($258,490), mining and reclamation ($215,408), combustion ($172,327), byproducts ($129,245), and beneficiation ($86,163). Obligated funding for demonstration projects includes a commitment for $6,000,000 in LRF funding ($4,000,000 investment and $2,000,000 grant) for the Dakota Gasification Company’s carbon dioxide pipeline project. It was approved for funding under grant round XXVIII from 1997-1999 biennium funding. The three other demonstration projects were approved at the last LRC meeting on December 4, 1997. They are 1) a forced oxidation gypsum plant to be constructed at Coal Creek Station (LRF funding not to exceed $926,500); 2) demonstration of the rear-dumping dragline bucket (LRF funding not to exceed $250,000); and 3) demonstration of lignite combustion byproduct in the Riverdale haulroad (LRF funding not to exceed $298,000). There is $1,718,834 available in demonstration project funds for the 1997-1999 biennium. Grant Round XXX Grant Applications Porter summarized technical peer reviewers comments. As technical advisor to the LRC, he also gave his recommendations for the Grant Round XXX project applications as follows: LRC-XXX-A: “Matching Coal Quality and Boiler Operation”; submitted by BNI Coal, Ltd., Minnkota Power Cooperative, and Microbeam Technologies, Inc.; Co-principal investigators: Steven Benson, Ph.D. (for MTI), Richard Schwalbe (for MPC) and William Peterson (for BNI); Request for $260,050.49; Total Project Costs: $1,227,415; Project Duration: 18 months. Porter said the principal objective of this small research project is to improve boiler operation at the Milton R. Young Station. The primary goal is to reduce oil consumption in the cyclone-fired boilers, and the secondary goal is to evaluate the effects of coal quality and boiler operating parameters on NOx and SOx, furnace slagging and fouling, and electrostatic precipitator performance. LRC-XXX-A is the third study in this area. The other two are “Coal Quality Management System” (FY95-XIX-60) and “Coal Sampling System” (FY97-XXV-71). All three independent technical peer reviewers in their reviews indicated that LRC-XXX-A should be funded, as did Porter. The technical peer reviewers gave the project an average weighted score of 217 out of 250 points. Porter said the project is a logical next step in the study series and is one of the highest rated proposals ever submitted. Potential conflict of interest parties are Minnkota Power Cooperative, BNI Coal, Minnesota Power and the Energy and Environmental Research Center. Dwyer explained what conflict of interest means as it pertains to the LRC. The internal operating procedures adhered to by the LRC include disclosing conflict of interest. This was set up intentionally 3 by the North Dakota legislature. Conflict of interest is not a problem; it is a given that all projects will have conflict of interest parties.
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